Scrums: The difficulty with ships

On the very first page of the Parliamentary Budget Officer’s latest military procurement costing report – this one evaluating what the budget for two new joint support ships ought to be – there is a footnote.

It states that in compiling the report in question, the Department of National Defence provided PBO with two estimates for the new ships – $2.533 billion if Canada were to manufacture them with a brand-new design, or $2.518 for what’s called “Military Off the Shelf.” What everyone noticed Thursday was the next fact listed in the report: in an estimate from August 2008, DND pegged the cost of two new ships at $2.96 billion.

“Using DND’s escalation rates, this would bring this estimate in line with the PBO’s at $3.2 billion,” the footnote says.

As far as the opposition was concerned Thursday, the implications of that little remark were pretty vast. After all, the government’s current budget for the ships is $2.6 billion, a figure it settled on in 2009, a full year prior to the adoption of the National Shipbuilding Procurement Strategy – which outlines things like the necessity to build the vessels in Canada.

“They set the budget at $2.6 billion knowing two years earlier it was $3 billion to get what they wanted,” New Democrat Matthew Kellway told reporters after question period Thursday. “Five years ago, they knew they couldn’t buy those boats for $2.6 billion and they’re still claiming now that they can do that.”

He called the whole thing a circus.

If the PBO’s estimate is accurate and the government wants to either build the ships to minimum specifications, or ensure the entire program doesn’t fail, then surely the $2.6 billion can’t be enough, Liberal interim leader Bob Rae speculated earlier in the House. If that figure isn’t going to change, then something will have to give.

“What will it be, fewer ships or a bigger budget?” Rae asked the government.

Public Works Minister Rona Ambrose stood to offer a response, pointing out that even the PBO advised his high-level cost estimates should be viewed neither as “conclusions in relation to the policy merits of the legislation nor as a view to future costs.”

The government has independent oversight of its own numbers, she continued, and that everyone should remember that the ships “are in the design phase,” and “if adjustments need to be made, they will be made with the Navy and the Coast Guard.” But, early as it may be, it is exactly those potential adjustments that have the opposition worried. What will Canada get for its $2.6 billion? And will it be what the Navy needs?

It’s a troubling point, this convergence of a message of strict and steady control over the nation’s finances and another one that shouts for more money – maybe billions more – to keep a major military procurement from failing for a second time on the government’s watch. And yet, that’s where the Conservatives are.

Asked earlier in the day whether planning the budget for an acquisition prior to developing its parameters (like those set out in the NSPS) is a good way to approach military purchasing, PBO Kevin Page said it makes things “difficult.”

Indeed, that seems to be the case: Difficult for those budgeting things, difficult for those awaiting new kit, difficult for those hoping to build, difficult for those paying for it all, and difficult for those at the cabinet table facing the prospect that everyone could ultimately wind up with nothing if they’re not careful.